Dow component Microsoft Corp. (MSFT) posted an all-time high at 267.85 on Thursday after a positive reaction to their widely-publicized Windows 11 introduction “event’’. The rally capped off a 10% three-week-advance that featured a breakout above April resistance at 262. This price action sets the stage for continued gains but less-than-spectacular accumulation readings predict a pullback into the 240s before the stock heads substantially higher.
Windows 11 Introduction Event
Microsoft revealed details of the new operating system on the same day as the new high print, outlining a host of ‘quality of life’ upgrades that include resized taskbars with bigger touch targets, direct XBox PC gaming, Android app compatibility, and Auto HDR. System updates will be 40% smaller than Windows 10, lowering frustration levels for impatient users, while the new software will support different workspaces for gaming, work, and home.
Wedbush Securities analyst Dan Ives raised his price target to $325 with an ‘Outperform’ rating before the event, reaffirming that Mr. Softee remains the firm’s top big cap cloud play. He also notes that “while many tech stocks overall are all being lumped together as part of the WFH trade, we believe the growth story at Microsoft is not slowing down as more enterprises and governments head down this cloud path over the coming years.”
Wall Street and Technical Outlook
Wall Street consensus has been pristine for months, maintaining a ‘Buy’ rating now based upon 30 ‘Buy’, 3 ‘Overweight’, and 3 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $256 to a Street-high $340 while the stock is set to open Monday’s session more than $30 below the median $300 target. This placement reveals a fair degree of Main Street hesitation, despite the company’s outstanding quarterly metrics.
Microsoft posted strong returns in 2019 and 2020 despite obvious headwinds and is on course for another year of solid performance. However, accumulation as measured by On-Balance Volume (OBV) topped out in February and has now pulled back near late 2020 levels. This lack of interest reflects the transition of investor capital into smaller cap growth plays. In turn, the stock is vulnerable to a long-overdue pullback in blue chip benchmarks.
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Disclosure: the author held no positions in aforementioned securities at the time of publication.
This article was originally posted on FX Empire
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